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Street ga-ga for Google Q1

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Google investors breathed a sigh of relief Thursday after the company defied skeptics by reporting healthy first-quarter results and proving that a weak U.S. economy is no match for the world's most powerful online search company.

The better-than-anticipated financial report sent Google shares soaring nearly $80, or 17%, in after-hours trading, putting the stock above $500 a share, about where it was trading six months ago.

Indeed, Google shares have struggled this year, thanks in part to often-discussed comScore data indicating that Internet surfers weren't clicking on Google ads as often as investors were hoping they would.

Google had countered that third-party data was not taking into account its own efforts to reduce clutter by delivering fewer though more relevant advertising in its search results. Thursday's report proved the merit of Google's claim.

To be sure, growth in paid clicks has taken a hit, rising just 4% year-over year compared with 20% in 2007 over 2006, but that's better than the negative growth many had feared.

The company even said the ads it serves in YouTube videos were a hit, garnering more attention than do banner ads. Co-founder Larry Page said 10 hours of new video is posted to YouTube per minute.

The company posted $1.31 billion in net income for the quarter, up from $1 billion a year ago. Adjusted for one-time items, the company earned $4.84 a share, beating analyst expectations of $4.52.

Revenue grew 42% to $5.2 billion, with 51% coming from international markets, the first time the majority of Google's sales came from outside of the U.S.

Analysts also have been curious about Google's test partnership with competitor Yahoo, which is fending off an unsolicited offer to be acquired by Microsoft. Pressed for details during a conference call Thursday, Google CEO Eric Schmidt declined, offering only that, "It's nice working with Yahoo, and we like them very much."